Friday, April 24, 2015

3 axioms behind “8 steps to innovation” framework

How is “8 steps to innovation” framework different from other frameworks? One way to answer this question is by articulating its unique features which I did in an earlier article. Another way is to understand the answer to the question: What are the key axioms behind the framework? In this article, I would like to present 3 key axioms behind “8 steps to innovation” framework.

1.      Innovativeness can be built like stamina: I remember meeting a CEO of an old family-owned business house at its headquarters in south Mumbai a couple of years ago. He mentioned two things about his half-a-century old business which I found interesting. He said: (1) These days our competition doesn’t even consider us a serious player and (2) We want to become like Apple and we don’t have much time. I told him that I don’t know how Apple innovates and I certainly don’t know any quick way to become “like Apple”. My experience tells me that building innovativeness is similar to building stamina. Long distance runners know that if you are a couch potato and if you want to run a marathon, you need a long term commitment to disciplined practice. No miracle can change your stamina overnight. For a long distance runner, the progress may be measured more by the distance (5K, 10K, 20K etc) and the timing of the run. Similarly, in “8 steps to innovation” framework we have identified the two dimensions of innovation maturity: creative confidence and incubation effectiveness. And we show how progress may look like as the organization goes from level-1 (Jugaad) to level-5 (Excellence). A typical transition from one level to the next takes typically one to three years, far from the expectation of the CEO I mentioned earlier.

2.      Humans can’t predict the future: I am now used to seeing the disappointment when a wannabe innovator hears my response “I don’t know” to his question “Will my idea work?” The confidence in our ability to predict long term success of an idea is a classic cognitive illusion. It was true when Johannes Gutenberg was working on his printing press in 1450. And it is true for your favourite e-commerce start-up in Bangalore today. What does “8 steps to innovation” recommend then? Well, it emphasizes identifying untested assumptions embedded in your idea and validating them at low-cost and at high speed (step-4). And it also recommends protecting your downside as much as possible by building a margin of safety (step-8). I have elaborated this further in the article: “Is 8 steps to innovation predictive or non-predictive?

3.      Decisions happen through intuition-reason inter-play: Legendary investor Warren Buffett recounts how he made the decision to acquire the textile mill Berkshire Hathaway during 1964-65 in his letter shareholders published earlier this year. The decision was driven more by his emotion (he was mad at Berkshire’s CEO Seabury Stanton) than reason. In Buffett’s own words, “It was a monumentally stupid decision” The decision resulted in diverting $100 billion or so of Buffet’s fund to a collection of strangers. Notwithstanding our belief, human decisions are made by an inter-play of a strong a voice of intuition-cum-emotion and a weak voice of reason. Whenever there is a fight between the two voices, intuition led by emotion wins most of the time. This has significant implications for everybody – including innovators and investors. How does “8 steps” address this? Well, we borrow the metaphor of Elephant-Rider representing the voice of intuition and reason respectively from the book Switch by Chip & Dan Heath. And then propose interventions which can align the Elephant and the Rider to move in the same direction in order to become more innovative systematically.

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